eTail dTail Newsletter
Powered by: MerchantAdvantage
  Print Newsletter  Forward Newsletter to a Friend 
  October 31, 2006
SHOP.ORG ANNUAL CONFERENCE
Is it worth it, what you missed, and preparing for the Holiday Season
by Chip Arndt
Miami, FL (October 31, 2006)—Online merchants call us often asking whether or not they should attend trade shows. The simple answer is, yes. Why not attend any event that can help you learn more about online retail that offers an opportunity to network and build relationships? But no answer is ever that simple. The two main issues facing small to mid sized merchants when deciding to attend trade shows are often:
  1. Reconciling the cost of attending the conference with the time they have available to run their business, and
  2. Does attending a trade show really help the small to mid sized business right now?
Shop.org does a wonderful job to attract all merchants with affordable pricing, workshops, networking opportunities, and speakers. But none of it means anything if you are not proactive in meeting people. The real benefit of Shop.org is to meet people and to create business relationships with companies that you think can help grow your business in the short term and develop relationships with others that might help make you money in the long term. And probably the person you are talking to is looking for the same thing. If you are attending a trade show just to learn about online retail, may I suggest saving your money, stay home, and read the various free newsletters and articles available online. This is not to say that you can’t learn a lot at a trade show, but you might want to balance the costs of doing so with what you can learn by doing your own research.
This year MerchantAdvantage attended Shop.org as an active attendee. We did not have a booth but instead opted to buy an “all access” pass. This proved a great opportunity to meet and speak with all sorts of folks from Wall Street analysts to CEO’s of Shopping Destination Sites. It also was a wonderful opportunity to learn from experts in the industry and folks in the trenches doing their best to help define the robust online retail marketplace through their research, companies, and tools to help the online merchant. So what did we learn? Here are a few highlights and takeaways, focusing on the small to mid-sized business. We hope you find these highlights helpful.
The Marketplace
Great News:
There are approximately 500,000 online ecommerce sites in the USA today. If you count the smaller eBay type of sellers this number goes up to over 700,000. This is great news because it shows that people are making money selling online. As the marketplace continues to adopt new technologies (such as wireless applications) opportunities exist to build online businesses and develop new strategies to drive online sales.
Good News:
The good news for all of us trying to build a business is that online sales (excluding travel) is expected to grow well into 2010. Analysts state that we can expect online sales for year end 2006 to reach about $132 billion. This represents less than 3% of total retail sales in the USA. This number is expected to grow to about $225 billion by 2010, representing about only 4% of total retail sales. [Note: everyone treats travel related online sales separately from traditional retail] . The reason that this is not great news is that much of this increase is attributed to the evolution and growth of established off line retailers leveraging their online storefront more effectively.

INCREASE YOUR PROFITS AND REDUCE COSTS!
Because Nobody Knows Your Business Like You Do,
for only $245 a month Channel Management Gives You the Ability to:

  • Strategically Submit Your Top Selling and High Profit Products to the Channels Where They Perform Best!
  • NEW! View Up to the Minute Performance of Your Channels, Storefronts, Categories, and Products with Chanalytics(sm)!
  • Quickly Identify and Remove Poor Performing Products!
  • Free Setup— A $400.00 Value!
  • FREE Live Support for 30 Days to Get You Up an Running!
  • No Activation Fee, No Locked in Contract!
  • Channel Management Supports All Channels! (Shopping Comparison Sites)

CLICK HERE NOW TO SCHEDULE YOUR LIVE DEMO!

or CALL NOW! 1.800.550.9466

www.merchantadvantage.com

Not so Good News:
As more competition comes into the online marketplace, sales margins will decline as companies spend more money to better market and manage their online sales. These margins today are generally 14% and may shrink to 7-8% by 2015. Of course this is an industry average, and cost-effective solutions in the marketplace may help to minimize this margin erosion. MerchantAdvantage helps to do just this through its products as Channel Management with Chanalytics(sm).
Marketing
Search:
Paid search is reshaping the way companies market online and become known as a trusted vendor. Companies spend millions of dollars and waste millions of dollars on ineffective search because they use below rate vendors, or do it badly internally, and lack the tracking tools necessary to see if their search campaigns are effective. Paid search can be effective but don’t forget the myriad of other methods to get your brand out there such as: local TV, cable, print, flyers, advergaming, RSS, emails, and reverse marketing with strategic partners.
Local Search:
Google’s localization of search is changing the way online consumers buy. Customers may now prefer to search online but buy offline at a local brick and mortar shop highlighted online. Pure online retailers must ensure that they compete against this “possible” trend by ensuring that their online marketing efforts make buying online an experience that is preferred over going to a local brick and mortar store.
Adwords:
Google has done it and others are following. Adword management analytics is the key to maximizing return on investment when entering this marketing avenue. There was little to no disagreement that Adwords can be very, very effective to reach online consumers, just be careful on how much you spend versus what quality traffic is driven to your site, and don’t forget that local marketing to your community can also drive traffic to your business (see Search above).
Email Strategies:
People underestimate the power of the proper use of email and how inappropriate use can actually hurt your business. There are several solutions in the marketplace, so which ever one you choose, ensure that they have precise tracking methods to execute and follow up on any campaign. By the way, Jupiter Research predicted that $107 million dollars will be wasted on email that was NEVER received and was blocked!
Storefront Modifications:
Consumers expect more glitz and glam on websites today and new technologies afford companies the opportunity to keep the consumer on their site longer while shopping for the products they desire.
Strategic Partners:
Driving traffic to your site, as a small to mid-sized business, is not easy, especially with confined marketing budgets. Thus, partnerships with blogs that talk about your product line, and companies that market to a similar client base may help drive new customers to your business.
PARTNER SPOTLIGHT: Check Out PriceRunner!
PriceRunner.com
  • Launched in 1999 in Europe - PriceRunner is among the top 3 shopping comparison sites internationally with a leading presence in the US.
  • PriceRunner (as part of ValueClick Inc) accesses the largest online media network with over 70% monthly US online penetration.
  • Recent exclusive partnerships will make PriceRunner the shopping engine of choice on MyPoints.com, Juno, NetZero, Morpheus, FortuneCity and the latest Opera Browser.
  • PriceRunner shows more information, reviews and prices than other shopping comparison sites – delivering exceptional conversion and sales volume for our merchant partners.
  • PriceRunner is ranked #1 – USA - Best Overall Shopping Comparison Site – PC World Magazine – Dec 2005
PriceRunner programs are easy to start with no up front deposits required. Programs are all inclusive -offering logo, link, message and retailer contact information. Reporting provides traffic and costs to the product level along with dedicated account representation. Click here for more information.
Solutions and New Products
The real problem with most of the trade shows to date is that many of the solutions presented by the vendors are expensive. It seems that many shows target large online and multi channel retailers. Many smaller vendors simply cannot afford to be at trade shows. To make things worse, business offerings are often simply too expensive for the small to mid-sized business. That being said, there are often new gems that pop up in the mix that are affordable. Some of these include www.PowerReviews.com, which helps drive traffic to your site via reviews, www.HackerSafe.com, an affordable solution to protect your website from outside hackers, and www.inQ.com an affordable onsite chat commerce sales assistant application for any business.
General Advice
The great part about Shop.org is that it is filled with people who know a lot about online retailing. The hard part is sifting through what you can do now and what you might have to wait to do later. That being said, here were some helpful hints that we picked up.
Focus:
Don’t try to be everything to everybody, target a market and go for it. Ensure that everything you do and present to the marketplace reinforces that message.
Analytics:
It is a waste of money to sell, market, or even be online if you don’t have the ability to track how you are doing.
Technology:
“Outsourcing” versus “doing it yourself” is a debate that will never end, but often companies waste valuable time and resources by not depending on outside solutions and focusing on their core business. It is important to work with other companies who are more focused than you ever could be on processes important to your business. Ensure that any outside solution does not limit your ability to test and try new technologies that come to the market daily. And don’t be afraid to test new technologies that get your brand in front of people in new ways such as video ads, myspace, advertainment, and new wireless campaigns (if you can afford to do it). MerchantAdvantage’s products never limit a company’s ability to work with other products in the marketplace.
Relationships and Word of Mouth:
This is the internet! Be open to everyone, as you never know who might be that one relationship which brings you customers.
Marketing:
The Holy Grail is to get your brand in front of everyone and have them love you. Solutions and strategies are numerous and your downfall is trying to adopt them all. Take one step at a time to building your brand and ensure that whatever campaign you pursue, you ensure that you execute it to perfection before moving on to the next one.
The Holiday Season and What To Expect
Holiday Season, the last 5 weeks of the year, generates about 20% of total annual retail sales. So roll out those marketing efforts NOW and get in the minds of your customers. The forecast for the 2006 Holiday spending is that Holiday shoppers are predicted to spend more than $1,000 each, which represents an 8% increase over 2005.
Some marketing “hints”:
  1. Offer gift center on website
  2. Offer gift Coupon and Gift Card offer on website
  3. Delivery, gift wrapping, gift card specials with purchase on website
  4. Special targeted email campaigns
  5. Define cut off dates for shipping
  6. Promote brick and mortar store pick-up, if you are multi channel retailer
MerchantAdvantage Wrap Up:
Trade shows are always helpful if you understand why you are there and have a clear of strategy of what you expect to get from the trade show. Shop.org certainly is beneficial although it may not immediately lead to new clients for vendors or showcase affordable business solutions for small to mid-sized online merchants. The real value of attending Shop.org is for the information and relationships. The online retail industry is still defining itself everyday and there are numerous professionals who want to help you business grow. For the price of airfare, hotel stay, a few meals in New York City (outside of the conference offerings) and, of course, a Broadway show, Shop.org was excellent and for MerchantAdvantage provided wonderful new relationships and industry information, and helped define business strategies into 2007.

PAGE TOP

 
Find Santa's Pants and Win!



"MerchantAdvantage is here to be your partner in growing your business in the multi billion dollar and complex world of online shopping. We are here because you are online.sm"

Michael Lambert, CEO


• Effective Product Manipulation
MerchantAdvantage's Channel Management with Chanalytics(sm) is the right tool for do it yourself e-commerce. Read Article>>

• Online Advertising Will Grow
Recently forecasts predict online advertising will grow approximately 40-45% each year from 2006 until 2010. In 2006 alone, online sales are expected to exceed $200 billion dollars.

• Comparison Engines let Consumers Window-shop
In a recent article, conversion rates for comparison engines are said to be higher overall than keyword advertising, which requires a consumer to click into a merchant’s website before seeing complete information on the item being advertised. Comparison engines instead let consumers window-shop before clicking.

• Merchants should Customize their Feeds
The necessity for merchants to custom tailor product selection for each comparison engine is essential. Understanding that each comparison engine is different, and thus a different marketplace, customized catalogs for each comparison engine create better results. On study claims a boost to merchant’s ROI (return on investment) from 28 percent to more than 200 percent by using this and other data manipulation methods.


Should you be on Marketplaces or Shopping Comparison sites?
by Michael Lambert

Many retailers have a strong sense of where they need to be marketing, and some are less sure. Yet others are not even sure of the difference. I think I can help –

Let’s start by noting that both of these entity types require merchants to send a digital copy (product feeds) of appropriate products for the purpose of marketing. This is product information including SKU, Product name, price, description, category and more often than not, quite a bit more. Most have their own format to which they expect merchants to adhere.

Perhaps it would be more revealing to define some of the differences between Shopping Comparison Sites (SCS’s) and Marketplaces (MP’s). The main difference is where the Point of Sale occurs. Although product catalogs are fed to both of these entities, the actual purchases are handled in a completely different manner. With SCS’s, the consumer clicks on a product they wish to purchase and will arrives at a merchant's storefront/shopping cart/website in order to make the final purchase. With MP’s, the consumer actually makes the purchase from the MP, and the final order is transmitted to the merchant from the MP. EX. So, a consumer finding the product that they wish to purchase at Shopzilla would click on it, and arrive at the merchant's site where they may, or may not purchase the item. A Consumer finding the product that they wish to purchase at Amazon will purchase the product right from Amazon. Amazon will then forward the order to the merchant for fulfillment.

Well, that’s the technical difference, but the marketing difference is also significant. When marketing through SCS’s, a merchant will pay a nominal fee for each consumer click on a merchant's product, whether a purchase occurs or not. These fees typically range from 0.20 – 0.95 depending upon the Shopping Comparison site, category, and other varied bits of information. In this model the customer belongs to the Merchant.

A marketplace only receives compensation when a sale occurs, but will take a percentage of the gross revenues. In this model, the customer generally belongs to the marketplace.

So which one is better? – Ahhh, that’s the question. But, unfortunately there isn’t one answer. I can’t really decide for anyone, even if they wanted me too. However, I can illustrate some thoughts that have been shared with me on how merchants make their decisions.

Things like price point, profit margin, product availability, data compatibility, competition and the specifics of each MP or SCS influence a merchant’s decisions. Profit margin is often a tell-tale for MP’s. As MP’s charge a percentage, the products to be fed to a MP will need to have at least the MP required margin to be considered for MP. With Marketplaces, the performance, or number of sales isn’t quite as important when looking at the “loss” side of the sales/marketing equation as the commission is only paid upon the sale being completed. So if we put these thoughts into an equation, it might look something like –

Product margin - MP required margin = acceptable margin for the merchant?

Perhaps that helps to paint a clear picture for MP’s but how does margin translate for SCS’s? Well, a new number is introduced into the equation – performance. With SCS’s, they receive a very small amount of money for a click, but there is not a guarantee of a sale with each click. SCS may not make sense for extremely low priced items, even if the margin percentage is wonderful. As an example, it doesn’t really make “profitable” sense to market a product under $1.00 on a SCS as even one click is likely to put you negative on that product. However, for products above a defined threshold, say $10 or $20, a favorable click to purchase ratio (performance) could really increase overall net margins within the merchant's company. In this case –

Product margin – (click costs * clicks) = acceptable margin for merchant?

In the end, these decisions need to be made based on viable data. Regardless of possible profits at marketplaces, if a product doesn’t sell, it’s not worth the time to post it. Likewise, high margin products which don’t sell on SCS’s could be a waste of marketing dollars, unless these items somehow generate business in other ways. Profitability is the true decision maker, and if you have the appropriate analytics, the decision is not nearly as difficult. And once the decisions are made, a merchant should have a reasonably easy way of adding and removing products between MP and SCS, and even to different MP’s and SCS’s which perform differently.



For information on how MerchantAdvantage may help your business grow, please contact us:
Chip Arndt
Executive Vice President
Business Development and Strategy
305.895.9466 x113
partnerships@merchantadvantage.com